Inverted Duty Structure: sec 54(3) of CGST Act,2017
It is a situation where the rate of tax on inputs purchased is more than the rate of tax on outputs sold which leads to accumulation of input credit and the need for refund arises.
Outward supply includes supply of both Goods & Services.
Time Period:
- Form RFD-01 has to be filed within 2 years from the end of the financial year in which such claim for refund arises.
Exceptions:
- Does not apply to cases where output supplies are Nil or Fully exempt.
- Refund is not available in case of Construction services.( Notification no.15/2017 )
- Those covered by Notification no. 5/2017 (Woven fabrics of silk/silk waste/Paper yarn/Rail locomotives/Manmade Textile fibres etc)
- But the textile sector to be eligible from 1St Aug’18 ( Notification no.20/2018)
- Other notified supplies by the Govt.
Refund of accumulated ITC on account of reduction in GST Rate:
- Refund of ITC would not be available in such cases where the inversion is due to reduction in the GST rate on the same output goods.
Eg. An applicant trading in goods has purchased, say goods “X” attracting 18% GST. However, subsequently, the rate of GST on “X” has been reduced to, say 12%. In this case refund of inverted duty structure shall not be granted.
Points to Note:
- Refund of ITC on input service/contract services/job work services s is not available.
- Refund of ITC on capital goods is also not available.